What is commercial EPC?
Commercial Energy Performance Certificates (EPC) are energy surveys that determine how energy efficient a building or commercial premises are. The ratings on a commercial EPC start from G (least energy efficient), going up to an A for the most energy-efficient building possible. EPC is the measurement of an existing building’s energy efficiency and forms part of the Minimum Energy Efficiency Standards (MEES).
The EPC rating indicates the energy efficiency of a commercial building such as:
- installed heating
- lighting systems (building services)
This does not consider how the present occupier uses these systems.
What EPC changes are coming?
From 1st April 2023, NEW and EXISTING commercial lettings will need to meet a minimum EPC rating E, making it a legal requirement, unless a specific exemption applies.
This change and future EPC commitments stem from Government’s commitment to achieving a net-zero carbon emissions by 2050.
This strategy also aims to reduce energy bills, boosting our post-COVID economic recovery in a sustainable way.
Who is affected by the EPC changes?
Currently, there are no immediate actions to be taken, however, landlords should be forming strategies around how to improve the commercial property to rating E by 2023, rating C by 2027 and, rating B by 2030,
Landlords are currently fully responsible for EPC compliance, not the tenants.
However, we strongly recommend and encourage more collaboration between the two parties.
Although tenants are not responsible for the leased building’s energy efficiency, they likely have valuable suggestions about what changes could be made to increase the efficiency of the property and a collaborative approach is always advised.
Changes that could largely improve the EPC rating of commercial property:
- Replacing the boiler. Opting for a new energy-efficient boiler can cut down energy consumption.
- Installing double glazing. Upgrading your windows and doors to double glazing can improve your EPC rating and reduce noise.
- Installing wall insulation. Insulating your walls can reduce your EPC rating significantly, making sure no energy is lost.
- Improve lighting. Modern energy efficient LEDs can improve EPC rating and significantly reduce energy consumption
- Installing a renewable energy source, i.e. solar panels can improve your EPC rating and provide you with cheaper, greener energy.
Non-compliance with MEES could result in enforcement action and a fine.
What about the impact on commercial leases?
Rent costs – Any building improvements associated with a better EPC rating will also mean an inevitable rental increase. Landlords may wish to increase the frequency of rent review to reflect any changes in their lease agreement with the occupier.
Lower utility cost – Favourably, improved building efficiency may lower running utility costs or service charges, balancing the increased rent.
Business disruptions – Landlords will need to carefully plan any future energy efficiency works, causing minimal disruptions to tenants and day-to-day business operations.
What about BREEAM?
This global sustainability assessment method rates a property’s environmental, social, and economic sustainability performance. A recent study carried out by JLL shows only 16% of current office space has a BREEAM rating of Good to Outstanding.
Going forward, commercial office spaces will require significant development to meet sustainability and efficiency targets, while simultaneously meeting desired EPC ratings.
See the current timeline for commercial EPC changes
Landlords should prepare now for the changes, starting with a review of their properties to ascertain if they fall below the proposed new minimum threshold.
We would recommend landlords consult and engage with occupiers in respect of any proposed works and associated costs.
Both new and existing tenants should understand their property’s EPC rating.
Where it is below the new minimum thresholds, tenants should review their leases to understand if costs can be passed on. This will allow them to budget accordingly and engage early with landlords as to what the proposed plans are to achieve the new minimum standards.
If you are a landlord or a tenant of a commercial property or for more information on MEES and how they could affect you,
DO GET IN TOUCH WITH US:
T: 02382 355799
Nella Pang, Director
T: 07738 625 431
Jonathan Trice, Director
T: 07725 900 415
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About Omega RE
Omega RE is a commercial property advisory firm based on the South Coast. Providing expert advice to Landlords, Occupiers in the industrial, office and retail markets.
Omega RE is always thinking ‘Outside the Box’ in our advice to clients and the way we do business. We don’t settle for mediocre, we challenge the norm and are dedicated to finding solutions that is best for our clients.
We are a people business, based on strong relationships and partnerships, and we offer a personal level of service.
As the market evolves, we will too adapt to be successful and want the same for our clients. We are committed to finding innovative ways of marketing and how to do things more efficiently.
We will never stagnate.
We are disciplined in everything we do, we take time to understand the situation and set a bespoke strategy for each client. Not one size fits all. We do not cut corners or take shortcuts and our integrity is undisputed.
Providing clients’ with a hands-on approach to finding the perfect property; office, industrial, warehouse or retail space to meet business needs and negotiating the best commercial lease terms, is what we do best.
We come to work because we’re passionate about providing expert, innovative, independent advice to clients. We want to help businesses navigate the complexities of Commercial Real Estate.
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